Amazon's Antitrust Paradox (Amzn)

From the Yale Law Journal, Vol. 126, #3, Jan. 2017:

abstract. 

Amazon is the titan of twenty-first century commerce. In add-on to beingness a retailer, it is forthwith a marketing platform, a delivery together with logistics network, a payment service, a credit lender, an auction house, a major mass publisher, a producer of telly together with films, a fashion designer, a hardware manufacturer, together with a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to toll below-cost together with expand widely instead. 

Through this strategy, the companionship has positioned itself at the catch of e-commerce together with forthwith serves every bit essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s construction together with comport pose anticompetitive concerns—yet it has escaped antitrust scrutiny.

This Note argues that the electrical flow framework inwards antitrust—specifically its pegging contest to “consumer welfare,” defined every bit short-term toll effects—is unequipped to capture the architecture of marketplace ability inwards the modern economy. We cannot cognize the potential harms to contest posed yesteryear Amazon’s authorization if nosotros mensurate contest primarily through toll together with output. Specifically, electrical flow doctrine underappreciates the opportunity of predatory pricing together with how integration across distinct describe of piece of employment organisation lines may bear witness anticompetitive. These concerns are heightened inwards the context of online platforms for 2 reasons. First, the economic science of platform markets practise incentives for a companionship to pursue growth over profits, a strategy that investors convey rewarded. Under these conditions, predatory pricing becomes highly rational—even every bit existing doctrine treats it every bit irrational together with so implausible. Second, because online platforms serve every bit critical intermediaries, integrating across describe of piece of employment organisation lines positions these platforms to command the essential infrastructure on which their rivals depend. This dual business office also enables a platform to exploit data collected on companies using its services to undermine them every bit competitors. 

This Note maps out facets of Amazon’s dominance. Doing together with then enables us to brand feel of its describe of piece of employment organisation strategy, illuminates anticompetitive aspects of Amazon’s construction together with conduct, together with underscores deficiencies inwards electrical flow doctrine. The Note closes yesteryear considering 2 potential regimes for addressing Amazon’s power: restoring traditional antitrust together with contest policy principles or applying mutual carrier obligations together with duties.

Introduction

“Even every bit Amazon became ane of the largest retailers inwards the country, it never seemed interested inwards charging plenty to brand a profit. Customers celebrated together with the contest languished.”

—The New York Times1

“[O]ne of Mr. Rockefeller’s virtually impressive characteristics is patience.”

—Ida Tarbell, A History of the Standard Oil Company2

In Amazon’s early on years, a running joke amidst Wall Street analysts was that CEO Jeff Bezos was edifice a identify of cards. Entering its 6th twelvemonth inwards 2000, the companionship had yet to scissure a turn a profit together with was mounting millions of dollars inwards continuous losses, each quarter’s larger than the last. 

Nevertheless, a segment of shareholders believed that yesteryear dumping coin into advertising together with steep discounts, Amazon was making a audio investment that would yield returns in ane lawsuit e-commerce took off. Each quarter the companionship would study losses, together with its stock toll would rise. One intelligence site captured the dissever stance yesteryear asking, “Amazon: Ponzi Scheme or Wal-Mart of the Web?”3

Sixteen years on, nobody seriously doubts that Amazon is anything but the titan of twenty-first-century commerce. In 2015, it earned $107 billion inwards revenue,4 and, every bit of 2013, it sold to a greater extent than than its adjacent twelve online competitors combined.5 By about estimates, Amazon forthwith captures 46% of online shopping, amongst its part growing faster than the sector every bit a whole.6 In add-on to beingness a retailer, it is a marketing platform, a delivery together with logistics network, a payment service, a credit lender, an auction house, a major mass publisher, a producer of telly together with films, a fashion designer, a hardware manufacturer, together with a leading provider of cloud server infinite together with computing power. Although Amazon has clocked staggering growth—reporting double-digit increases inwards cyberspace sales yearly—it reports meager profits, choosing to invest aggressively instead. The companionship listed consistent losses for the kickoff 7 years it was inwards business, amongst debts of $2 billion.7 While it exits the cherry to a greater extent than regularly now,8 negative returns are withal common. The companionship reported losses inwards 2 of the concluding 5 years, for example, together with its highest yearly cyberspace income was withal less than 1% of its cyberspace sales.9

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